New government looking for more taxes

Indian Health Minister Dr. Harsha Vardhan is proposing a tax hike of INR3.5 per stick on cigarettes of all lengths and the removal of tax exemptions for bidi manufacturers as part of the new government’s 2014–2015 budget, according to a story in the latest issue of the BBM Bommidala Group newsletter.

The budget is due to be presented on July 10.

Vardhan, in a letter to Finance Minister Arun Jaitley, said raising the duty on cigarettes as a percentage of the retail price from about 45 percent to more than 60 percent would yield public health as well as fiscal benefits.

He said the previous government’s 19 percent increase on cigarette taxes in the February 2013 budget had been too meagre to have any meaningful impact.

In any case, since the increase had been focused on longer cigarettes, it had led to a spike in the production of smaller cigarettes.

Applying the levy to all cigarettes would prevent the industry shifting production and marketing shorter-length products.

Vardhan wants the bidi industry to be redefined to ensure the collection of revenues due and prevent tax evasion in the long run.